• You want to buy a corporate bond for your portfolio. It is a typical 10 year, $1,000 par value, semi-annual coupon paying bond. The annual coupon rate is 6%. It has been four years since it was issued. The bond is currently trading at 101.5. (10 pt.s)
  • What is the bonds yield to maturity?
  • If the company has the option to call the bond after 8 years at 103, what is the yield to call? Would the bond be called? Please explain.
• Hi-yield inc. is currently paying a $2.50 quarterly dividend on shares of its stock. Hi-yield paid a $1.80 quarterly dividend six years ago. The dividend has grown at a consistent rate and is expected to continue doing so. The current required rate of return on Hi-yield is 12%. Hi-yield has 400,000 shares of common stock outstanding. What is the value of Hi-yields equity? (8 pt.s)